Duke Energy Corporation (DUK) | The Buildout — AI Infrastructure
The Verdict
Duke Energy is a regulated utility. It builds and owns the generation, transmission, and distribution assets that deliver electricity and natural gas, and it earns a commission-approved return on those assets, recovered through customer rates. For the AI buildout, Duke sells no hardware, software, or models — it supplies power and grid interconnection to hyperscale data centers. The commercial instrument is the Electric Service Agreement, a long-dated contract that carries minimum-take provisions, credit support, and termination charges. Duke's job is to build the dispatchable generation, transmission, and nuclear capacity that the load requires, and to win regulatory approval for it.
| Market Cap | — |
| Revenue (TTM) | $33.4B |
| Revenue Growth | +6.7% |
| EBITDA Margin (TTM) | 46.9% |
| Net Debt | $90.6B |
| Earnings Beats | 6 of 7 |
| P/E (TTM) | — |
| EV/EBITDA (TTM) | — |
What We Like
- Contracted data center electric service agreements reached 7.8 GW by the Q2 2026 call, up from 7.6 GW in Q1 and roughly 4.5 GW on the Q4 2025 call.
- The late-stage high-confidence pipeline stands at 15.4 GW, inclusive of signed ESAs, with management targeting conversion of the remainder to contracts by the first half of 2027.
- The five-year capital plan of $103 billion was reaffirmed, with $5 billion to $10 billion of incremental upside tied to additional large-load contracts, particularly in Indiana and Florida.
- Contracts carry minimum take provisions, credit support, refundable capital advances, and termination charges — management says the minimum-take terms are the basis for its revenue growth projections.
- The Duke Energy Carolinas rate case settlement carries a 9.8% return on equity, a 53% equity capital structure, and earnings sharing that allows 50 basis points above the allowed return up to 10.3%.
What We’re Watching
- New ESA signings slowed to about 0.2 GW in Q2 2026 from 2.7 GW in Q1, while the 15.4 GW pipeline held flat across two quarters.
- The remainder of the pipeline must convert to ESAs by the first half of 2027; management attributes slower negotiations to deal complexity.
- Contracted customers do not begin taking energy until the second half of 2027 at the earliest, ramping through the early 2030s, so current-period revenue contribution is small.
- Rate case orders in the Carolinas are expected by mid-November 2026 and the Carolinas Resource Plan order by year-end 2026.
The case rests on converting contracted large-load demand into rate base. Directionally it is intact: the $103 billion capital plan is reaffirmed, the pipeline is large, and the regulatory record in the Carolinas has moved constructively with a settled DEC framework and DEP talks toward a substantially similar one. But the latest quarter showed the signing cadence decelerating to about 0.2 GW from 2.7 GW, against a fixed H1 2027 conversion deadline and revenue that does not arrive until H2 2027. The open question is whether the Q2 slowdown was quarterly lumpiness or the start of a trend.
Earnings Beat
Duke reported Q2 2026 revenue of $7,592 million and a gross margin of 73.1%, with adjusted EPS of $1.43 against $1.25 a year earlier. The EU&I segment contributed $0.15 of the improvement on customer growth and infrastructure investment, GU&I was largely flat, and Other added $0.03. Contracted data center electric service agreements reached 7.8 GW, up from 7.6 GW on the prior call.
| Metric | Q2 FY2026 | Q1 FY2026 | Q2 FY2025 | YoY |
|---|---|---|---|---|
| Revenue | $7.6B | $9.2B | $7.5B | +1.1% |
| Gross margin | 73.1% | 67.9% | 29.8% | +4330bps |
| EBITDA | $3.7B | $4.4B | $3.4B | +10.2% |
| EPS | $1.40 | $1.99 | $1.27 | +10.7% |
| Data center ESAs secured | 7.8 GW | 7.6 GW | n/a | — |
| Adjusted EPS | $1.43 | $1.93 | $1.25 | +14.4% |
We have now secured 7.8 gigawatts of electric service agreements with data center customers.— Brian Savoy, Executive Vice President and CFO, 2026-08-04
Management tone: Management's tone held steady across the Q1 and Q2 2026 calls: execution-focused and anchored to customer affordability. The long-term growth language was identical in both quarters — they said they are more confident than ever that they will deliver in the top half of the range beginning in 2028. On the Q2 call they acknowledged that large-load negotiations are taking a little longer at times because they are very complicated transactions, while maintaining the H1 2027 conversion target. Asked about construction bottlenecks, they pointed to Duke's building experience rather than acknowledging constraints, and they declined to set any timeline for new nuclear.
Management Guidance
Duke reaffirmed FY2026 adjusted EPS guidance of $6.55 to $6.80 on both the Q1 and Q2 2026 calls. Long-term adjusted EPS growth is guided at 5% to 7% through 2030, with a stated expectation of earning in the top half of the range beginning in 2028. FFO to debt is targeted at 14.5% for 2026 and 15% over the long term. The five-year capital plan of $103 billion was reaffirmed, with $5 billion to $10 billion of incremental upside within that window, which management says is triggered when the ESAs are signed.
Trajectory
The top line is uneven quarter to quarter but trending up. Revenue reached $9,178 million in the March 2026 quarter, up 11.3% from $8,249 million a year earlier on recovery of infrastructure investments and customer growth; the June 2026 quarter came in at $7,592 million. Over the trailing twelve months revenue was $33,377 million with EBITDA of $15,651 million, a 46.9% margin, and free cash flow of $1,541 million. Near-term costs have grown faster than revenue — total operating expenses rose 15.6% in the March quarter against 11.3% revenue growth — led by fuel, storm costs, a legal settlement, and depreciation on a growing asset base. Interest expense rose $79 million year over year as the capital program is financed. Management describes the margin inflection as a 2028 event tied to large loads arriving.
The Model
The model projects FY+1 revenue of $33,960 million and EBITDA of $16,148 million, a 47.55% margin. For FY+2 it projects revenue of $35,560 million and EBITDA of $17,122 million, a 48.15% margin. The near-term anchor is the reaffirmed $103 billion capital plan and the rate base it puts into service, with no large-load energy being taken yet. FY+2 reflects the start of the data center ramp, which management expects to begin in the second half of 2027 and run into 2028.
| Metric | FY2025 | Next FY (E) | Following FY (E) |
|---|---|---|---|
| Revenue | $32.4B | $34.0B | $35.6B |
| YoY Growth | — | +4.9% | +4.7% |
| EBITDA | $14.9B | $16.1B | $17.1B |
| EBITDA Margin | 46.1% | 47.5% | 48.1% |
Projections are the median of 4 independent model runs. The model’s revenue sits 5.6% above analyst consensus.
Duke reaffirmed FY2026 adjusted EPS guidance of $6.55 to $6.80 on both the Q1 and Q2 2026 calls. Long-term adjusted EPS growth is guided at 5% to 7% through 2030, with a stated expectation of earning in the top half of the range beginning in 2028. FFO to debt is targeted at 14.5% for 2026 and 15% over the long term. The five-year capital plan of $103 billion was reaffirmed, with $5 billion to $10 billion of incremental upside within that window, which management says is triggered when the ESAs are signed.
What Could Go Right — and Wrong
- The remainder of the 15.4 GW pipeline converts to ESAs by the first half of 2027, triggering the $5 billion to $10 billion of incremental capital in the five-year plan.
- The pipeline expands beyond 15.4 GW, reopening the generation build and capital plan upward.
- Regulators approve the DEC and DEP settlements and the Carolinas Resource Plan by year-end 2026, funding the generation and transmission the load needs.
- Contracted customers move to vertical construction on schedule and begin taking energy in the second half of 2027 as management expects.
- New nuclear becomes financeable if a risk-sharing structure addresses first-of-a-kind and supply chain risk and provides financial protections.
- ESA signings stay near the Q2 2026 pace, making the H1 2027 conversion deadline hard to meet and pushing the 2028 inflection out.
- Cost inflation outruns rate recovery, with equipment and labor inflation and EPC constraints building.
- Regulatory outcomes come in below the settlement framework, or DEP settlement talks fail and the case goes to litigation.
- Behind-the-meter self-supply by data center customers diverts load Duke would otherwise contract.
- Funding needs widen beyond the plan; Duke priced $600 million of at-the-market equity in 2026.
Looking Ahead
The next twelve months are a regulatory and execution window. Rate case orders in the Carolinas are expected by mid-November 2026, the Carolinas Resource Plan order by year-end 2026, and the Brunswick license extension application is to be filed by year-end 2026. The Carolinas utility combination takes effect January 1, 2027, and the capital plan is rolled forward in February 2027. Through all of it the central test is whether Duke converts the remainder of its 15.4 GW pipeline to contracts by the first half of 2027, because the $5 billion to $10 billion of capital upside, the 15 GW build, and management's stated path to the top half of its growth range beginning in 2028 all sit downstream of that conversion.
- Mid-November 2026Carolina rate case orders — DEC and DEP commission orders test the settled return framework.
- Year-end 2026Carolinas Resource Plan order — NC Commission order confirms the high-load scenario and resources.
- Year-end 2026Brunswick SLR filing — License extension application filed; later NRC approval.
- January 1, 2027Carolinas combination effective — Utility combination closes; $2.3B customer savings through 2040.
- February 2027Capital-plan roll-forward — Prints how much of the $5B-$10B upside enters the plan.
- H1 2027Pipeline conversion deadline — Remainder of 15.4 GW to convert to ESAs.
Financials
Annual Summary
| Metric | FY2024 | FY2025 | TTM | YoY |
|---|---|---|---|---|
| Revenue | $30.4B | $32.4B | $33.4B | +6.6% |
| Gross Margin | 50.0% | 52.7% | 68.2% | +265bps |
| EBITDA | $14.3B | $14.9B | $15.7B | +4.0% |
| EBITDA Margin | 47.3% | 46.1% | 46.9% | 114bps |
| Net Income | $4.5B | $5.0B | $5.2B | +10.1% |
| Free Cash Flow | $48M | $8.2B | $1.5B | — |
| Net Cash | — | — | — | — |
Key Ratios (Trailing)
- P/E TTM—
- EV/EBITDA TTM—
- EV/Revenue TTM—
- Price/FCF TTM—
- Gross Margin (TTM)68.2%
- EBITDA Margin (TTM)46.9%
- Net Margin (TTM)15.7%
- ROIC5.0%
- FCF Conversion9.8%
- SBC / Revenue0.0%
The Company
Duke Energy is an energy company headquartered in Charlotte, North Carolina, regulated by FERC and state commissions and operating in the U.S. primarily through subsidiaries. It reports in two segments. Electric Utilities and Infrastructure provides retail electric service to approximately 8.7 million customers in the Southeast and Midwest through Duke Energy Carolinas, Duke Energy Progress, Duke Energy Florida, Duke Energy Indiana, and Duke Energy Ohio. Gas Utilities and Infrastructure serves residential, commercial, industrial, and power-generation natural gas customers through Piedmont, Duke Energy Ohio, and Duke Energy Kentucky. What Duke sells is electric and gas service; what drives its earnings is the size of the rate base it builds and the commission-approved return on it.
The model is regulated capital deployment. Duke builds and owns generation, transmission, and distribution assets and recovers those costs through customer rates. Its five-year capital plan runs to $103 billion for 2026 through 2030, which management describes as the industry's largest regulated capital plan, deploying more than $1 billion per month. The fleet includes 11 nuclear reactors plus coal, natural gas, hydro, and renewables; in the March 2026 quarter natural gas and oil was the largest single generation source at 21,765 GWh, just ahead of nuclear at 18,506 GWh. Duke plans to add 15 GW of generation capacity by 2031, with roughly 5 GW of gas generation under construction and 2.5 GW in development.
Business Segments
Competitive Landscape
Within its retail territories Duke is a regulated monopoly, so the commercial question is not whether customers buy from Duke but where they site and whether they build behind the meter. The intel file names competitors in data center power supply including Dominion, Entergy, Exelon, NextEra, Southern, Xcel, American Electric Power, Chevron, NiSource, and Hut 8. The more significant emerging alternative is behind-the-meter self-supply: Core Scientific, Hut 8, Williams, and Brookfield all discuss it, which is both validation of power scarcity and a potential source of disintermediation. Management frames its own pitch as speed to power — pulling transmission, grid, and economic development teams together to move faster than alternatives.
- Dominion Energy (D)Named in filings; not discussed.
- Southern Company (SO)Named in filings; not discussed.
- NextEra Energy (NEE)Named in filings; not discussed.
- NiSource (NI)Named for Indiana large-load tariffs; not otherwise discussed.
- Hut 8 (HUT)Listed as behind-the-meter competition for large loads.
Supply Chain
Duke sits at the delivery end of the power chain: it buys turbines, fuel, equipment, and construction labor, and converts them into regulated electric and gas service. Several suppliers name Duke directly, including Williams, where Duke was Transco's largest customer in 2025.
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